I believe it is the nature of this business. They recognize revenue based on the terms of the rental period for the patient. If the patient dies before the end of the contract, VMD has to recognize this as a "bad debt" in the accounts receivable section. This used to be something like 10% of revenue but it's now like 2-2.5% given the diversification. I don't think it's a risk to the business, but investors may over extrapolate a particular quarter.
So in the case of death, VMD doesn't get paid by insurance? I was i QIPT for some time. Similar business, but worse execution. To many things I don't understand, so I'll stay on the sidelane.
So if the patient dies halfway through the month they only get paid for half the month, but they have to use estimates when recognizing revenue. So they may record all the revenue for the month then have to charge-off a portion in accounts receivable.
It's fair to stay away if you aren't comfortable with the business. It's not for everyone.
Why there is bad debt expense if the payer is the insurance company?
I believe it is the nature of this business. They recognize revenue based on the terms of the rental period for the patient. If the patient dies before the end of the contract, VMD has to recognize this as a "bad debt" in the accounts receivable section. This used to be something like 10% of revenue but it's now like 2-2.5% given the diversification. I don't think it's a risk to the business, but investors may over extrapolate a particular quarter.
So in the case of death, VMD doesn't get paid by insurance? I was i QIPT for some time. Similar business, but worse execution. To many things I don't understand, so I'll stay on the sidelane.
So if the patient dies halfway through the month they only get paid for half the month, but they have to use estimates when recognizing revenue. So they may record all the revenue for the month then have to charge-off a portion in accounts receivable.
It's fair to stay away if you aren't comfortable with the business. It's not for everyone.